UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                   FORM 10-QSB



                   (X) QUARTERLY REPORT PURSUANT TO SECTION 13
                                OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended: September 30, 2003


          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to

                        Commission File Number: 000-30771


                           INTERACTIVE MOTORSPORTS AND
                               ENTERTAINMENT CORP.
                          f.k.a. Pacific International
                                 Holding, Inc.
               (Exact name of registrant as specified in charter)



                                     Indiana
         (State or other jurisdiction of incorporation or organization)

                                   87-0678630
                           (I.R.S. Employer I.D. No.)

               5624 West 73rd Street, Indianapolis, Indiana 46278
                    (Address of principal executive offices)

                                 (317) 295-3500
              (Registrant's telephone number, including area code)


Indicate by checkmark  whether the Issuer:  (1) filed all reports required to be
filed by section 13 or 15 (d) of the  Exchange Act during the past 12 months (or
for such shorter  period that the registrant was required to file such reports),
and (2) has been subject to such filing  requirements  for the past 90 days. (1)
Yes [x] No [] (2) Yes [x] No []

Issuer's Revenues for its most recent fiscal year: $9,636,278.

As of November  15,  2003,  the Company  had issued and  outstanding  74,124,183
shares of Common Stock, par value $0.0001.


DOCUMENTS INCORPORATED BY REFERENCE: None


<PAGE>





                    INDEX TO QUARTERLY REPORT ON FORM 10-QSB



                                                                          Page
Section                                                                  Number

BASIS OF PRESENTATION.........................................................4

                                     PART I

Item 1.  Condensed  Financial   Statements  and  Notes  to  Condensed  Financial
         Statements
Condensed Consolidated Balance Sheets at September 30, 2003
        and December 31, 2002.................................................5
Condensed Consolidated Statements of Operations for the Three Months Ended
        September 30, 2003 and 2002...........................................6
Condensed Consolidated Statements of Operations for the Nine Months Ended
        September 30, 2003 and 2002...........................................7
Condensed Consolidated Statements of Changes in Shareholders' Equity
        for the Nine Months Ended September 30, 2003 and 2002.................8
Condensed Consolidated Statements of Cash Flows for the Nine Months
        Ended September 30, 2003 and 2002.....................................9
Notes to Condensed Consolidated Financial Statements.........................10
Item 2. Management's  Discussion and Analysis of Financial Condition
        and Results of Operations............................................11
Item 3. Qualitative and Quantitative Disclosures of Market Risk..............16
Item 4. Internal Controls and Procedures.....................................17


                                     PART II

Item 1.    Legal Proceedings.................................................17
Item 2     Changes in Securities. ...........................................17
Item 3     Defaults Upon Senior Securities...................................17
Item 4.    Submission of Matters to a Vote of Security Holders...............17
Item 5.    Other Information.................................................17
Item 6.    Exhibits and Reports on Form 8-K..................................17


SIGNATURES...................................................................18

CERTIFICATIONS...............................................................19





<PAGE>





                       NOTE ON FORWARD-LOOKING INFORMATION

This Form  10-QSB and other  statements  issued or made from time to time by the
Company  or  its  representatives  contain  statements,   which  may  constitute
"forward-looking  statements"  within the meaning of the  Securities Act of 1933
and the  Securities  Exchange Act of 1934, as amended by the Private  Securities
Litigation  Reform Act of 1995,  15  U.S.C.A  Sections  77z-2 and  78u-5.  Those
statements  include  statements   regarding  the  intent,   belief,  or  current
expectations  of the Company and members of its  management  team as well as the
assumptions on which such statements are based. All statements,  trend analyses,
and other  information  contained  in this  report  relative  to markets for the
Company's  products  and/or  trends in the  Company's  operations  or  financial
results,  as well as other  statements which include words such as "anticipate,"
"could,"  "feel(s),"   "believes,"   "plan,"  "estimate,"   "expect,"  "should,"
"intend,"  "will," and other  similar  expressions,  constitute  forward-looking
statements and are subject to known and unknown risks,  uncertainties  and other
factors  that may cause actual  results to be  materially  different  from those
contemplated by the  forward-looking  statements.  Such factors  include,  among
other things:  (i) general  economic  conditions  that may impact the disposable
income and spending  habits of consumers;  (ii) the  availability of alternative
entertainment  for  consumers;  (iii)  the  ability  of the  company  to  obtain
additional  capital and/or debt  financing;  (iv) the receipt of a going concern
opinion from the Company's  independent  public  accountants  for the year ended
December 31, 2002;  (v) the ability of the Company to obtain capital and/or debt
financing to satisfy its  obligations  as of year end 2003 or the ability of the
Company to renegotiate the maturity of those  obligations to extend the maturity
date beyond year end; (vi) the ability of the Company to generate  revenues from
the sale of simulators within the Company's  existing  inventory;  and (vii) the
ability of the Company to control costs and execute its business plan.

The  reader  is  cautioned  that any  such  forward-looking  statements  are not
guarantees of future performance and involve risks and  uncertainties,  and that
actual  results  may  differ   materially   from  those   contemplated  by  such
forward-looking statements. Important factors currently known to management that
could cause actual results to differ  materially  from those in  forward-looking
statements are set forth herein.  The Company undertakes no obligation to update
or  revise  forward-looking  statements  to  reflect  changed  assumptions,  the
occurrence of unanticipated  events or changes to future operating  results over
time.


<PAGE>




                              BASIS OF PRESENTATION

Effective  August  2,  2002,  Pacific  International   Holding,   Inc.,  a  Utah
corporation  ("PIH"),  which was originally organized in 1986, changed its state
of  domicile  and name by  merging  with and into  Interactive  Motorsports  and
Entertainment   Corp.  (the  surviving  entity),  an  Indiana  corporation  (the
"Company"), pursuant to an Agreement and Plan of Reorganization.  Per the merger
agreement,  each share of PIH common stock outstanding  immediately prior to the
effective  date of the merger was cancelled  and  converted  into four shares of
Interactive  Motorsports and Entertainment  Corp. common stock.  Although it had
been in a variety of  businesses  for over 15 years,  at the time of the merger,
PIH had limited operations.

Subsequent to the merger and effective as of the same date, the Company acquired
pursuant to a Plan and  Agreement of Exchange all of the issued and  outstanding
shares of common stock and  preferred  stock of Perfect  Line,  Inc., an Indiana
corporation  ("Perfect Line"), from the Perfect Line shareholders in exchange on
a "share-for-share" basis for shares of the Company's common stock and preferred
stock. As a result of the share exchange,  the Perfect Line shareholders held as
of August 2, 2002 Company shares representing  approximately  eighty-two percent
(82%) of the Company's  capital stock.  Also effective as of August 2, 2002, the
members of the Board of  Directors  of Perfect  Line were elected to replace the
members of the  Company's  Board of  Directors  and the  executive  officers  of
Perfect Line became the executive officers of the Company.

As Perfect Line had revenues,  operations,  and business activity, for financial
reporting purposes,  Perfect Line is considered the acquirer,  and therefore the
predecessor,  and the Company is  considered  the  acquiree for  accounting  and
reporting  purposes.  Due to the fact  that the  merger  is being  treated  as a
reverse  acquisition,  the  equity of the  Company  has been  recapitalized  for
financial  reporting  purposes.  The operations of Interactive  Motorsports  and
Entertainment  Corp.  have been  included in  consolidation  from August 2, 2002
until September 30, 2003.

All  information  in this  Form  10-QSB is  presented  from the  perspective  of
Interactive  Motorsports and  Entertainment  Corp. and its subsidiaries  Perfect
Line and Race Car Simulators, Inc. and not from the perspective of PIH.




<PAGE>


                                     PART I

Item 1. Condensed Financial Statements

        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
            f.k.a. Pacific International Holding, Inc. and Subsidiary

                      CONDENSED CONSOLIDATED BALANCE SHEETS

           As of September 30, 2003 (Unaudited) and December 31, 2002

<TABLE>

                                                                                  September 30,        December 31,

                                                                                       2003                2002
                                                                                       ----                ----
     ASSETS

<S>                                                                                     <C>                <C>
     Cash and cash equivalents                                                          $224,834           $582,905
     Trade accounts receivable                                                            14,374             86,734
     Merchandise inventory                                                                68,803            161,459
     Prepaid insurance and other expenses                                                 81,861             29,706
                                                                                    ------------       ------------
              Total current assets                                                       389,872            860,804
                                                                                    ------------       ------------

     Property and equipment, net of accumulated depreciation                             884,731          1,061,464
                                                                                    ------------       ------------

     Deposits                                                                             97,516            101,574
     Other intangible assets, net of accumulated amortization                             10,667             13,667
                                                                                    ------------       ------------
              Total other assets                                                         108,183            115,241
                                                                                    ------------       ------------

     Total assets                                                                     $1,382,786         $2,037,509
                                                                                    ============       ============


     LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
     Liabilities:

          Accounts payable                                                            $1,187,116           $349,210
          Accrued payroll and payroll taxes                                              171,098            162,894
          Sales tax payable                                                               46,641             65,423
          Gift certificates and customer deposits, net                                   119,655            141,617
          Accrued expenses                                                               540,973            524,197
          Accrued property taxes                                                          43,626             43,192
          Accrued interest                                                                28,000                  -

          Notes payable - current                                                        593,137                  -
                                                                                      ----------                  -
     Total liabilities                                                                 2,730,246          1,286,533
                                                                                      ----------        -----------


     Shareholders' equity (deficit):

          Common stock; $0.0001 par value, 200,000,000 shares authorized,
         74,114,183 (2003) and 61,300,000 (2002) shares issued and
         outstanding                                                                       7,411              6,130
          Convertible  preferred stock,  $0.0001 par value,  5,000,000 shares
         authorized,  2,272,728 (2003) and 4,745,456 (2002) shares issued and
         outstanding (See Note 5)                                                            228                475
          Additional paid-in capital                                                   3,819,854          3,653,445
          Retained deficit                                                           (5,174,953)        (2,909,074)
                                                                                     -----------        -----------
     Total shareholders' equity (deficit)                                            (1,347,460)            750,976
                                                                                     -----------        -----------

     Total liabilities and shareholders' equity (deficit)                             $1,382,786         $2,037,509
                                                                                     ===========        ===========
</TABLE>


    The accompanying notes are an integral part of the condensed consolidated
                             financial statements.


<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
            f.k.a. Pacific International Holding, Inc. and Subsidiary


                      CONDENSED CONSOLIDATED STATEMENTS OF
               OPERATIONS For the three months ended September 30,
                      2003 (Unaudited) and 2002 (Unaudited)

<TABLE>

                                                                                           2003            2002
                                                                                           ----            ----


<S>                                                                                      <C>              <C>
Net sales                                                                                $1,775,945       $2,276,657

Total operating expenses                                                                  2,241,214        3,034,499
                                                                                         ----------       ----------

Operating loss                                                                             (465,269)        (757,842)


Interest expense                                                                             21,000           32,604
                                                                                         ----------       ----------

Loss before income tax                                                                     (486,269)       (790,446)


Provision for income tax                                                                          -                -
                                                                                                  -                -

Net loss                                                                                  $(486,269)      $(790,446)
                                                                                          ==========      ==========


Net loss per Common Share:

         Basic                                                                              $(0.01)          $(0.01)
                                                                                            =======          =======
         Diluted                                                                            $(0.01)          $(0.01)
                                                                                            =======          =======
</TABLE>





   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.


<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
            f.k.a. Pacific International Holding, Inc. and Subsidiary


                      CONDENSED CONSOLIDATED STATEMENTS OF
               OPERATIONS For the nine months ended September 30,
                      2003 (Unaudited) and 2002 (Unaudited)

<TABLE>

                                                                                           2003            2002
                                                                                           ----            ----


<S>                                                                                      <C>              <C>
Net sales                                                                                $5,757,009       $6,985,118

Total operating expenses                                                                  7,942,456        8,375,289
                                                                                         ----------       ----------

Operating loss                                                                           (2,185,447)      (1,390,171)


Interest expense                                                                             80,432           95,198
                                                                                         ----------       ----------

Loss before income tax                                                                   (2,265,879)      (1,485,369)


Provision for income tax                                                                          -                -
                                                                                                  -                -

Net loss                                                                                $(2,265,879)    $ (1,485,369)
                                                                                        ============    ============

Net loss per Common Share:

         Basic                                                                              $(0.04)          $(0.02)
                                                                                            =======          =======
         Diluted                                                                            $(0.04)          $(0.02)
                                                                                            =======          =======

</TABLE>




          The accompanying notes are an integral part of the condensed
                       consolidated financial statements.


<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
            f.k.a. Pacific International Holding, Inc. and Subsidiary


                 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
                 SHAREHOLDERS' EQUITY For the nine months ended
               September 30, 2003 (Unaudited) and 2002 (Unaudited)
<TABLE>

                                                               Preferred  Member's    Additional   Retained     Shareholder
                     Common Stock   Common Stock   Preferred    Stock     Units and   Paid In      Earnings     Equity Member
<S>                 <C>            <C>            <C>          <C>       <C>         <C>           <C>          <C>
                       Shares         Dollars        Stock      Dollars   Dollars    Capital      (Deficit)    (Deficit)
                     ------------   ------------   ---------   ---------  ---------   ----------   ---------    -------------

Balance         at
December 31, 2001                                                          $650,000                 $(719,854)     $(69,854)


Net loss                                                                          -                (1,485,369)   (1,485,369)


Conversion of
member loans
to equity                                                                   400,000                         -       400,000

Issuance of
preferred stock                                      4,745,456     475                 2,484,525                  2,485,000
with warrants                                        ---------     ---                 ---------                  ---------

Issuance of
common stock        61,300,000          6,130                                            178,075                    184,205
                    ----------          -----                                          ---------                  ---------

Conversion of
member's equity
to additional paid
in capital                                                                 (850,000)     850,000
                                                                           ---------   ---------

Distribution to
member                                                                     (200,000)                                (200,000)
                                                                           ---------                              ----------

Balance at
September 30, 2002
                    61,300,000         $6,130       4,745,456      $475        $  -    3,512,600  $(2,205,223)    $1,313,982
                    ==========         ======       =========      ====     =======    =========  ============    ==========







Balance at
December 31, 2002   61,300,000         $6,130       4,745,456      $475               $3,653,445  $(2,909,074)    $  750,976

Net loss                     -              -               -         -                        -   (2,265,879)    (2,265,879)

Issuance of
common stock
for consulting
services                90,000              9               -         -                   20,571            -         20,580

Issuance of
common stock
for convertible
preferred           12,724,183          1,272      (2,472,728)     (247)                  (1,025)

Issuance of
secured notes
with warrants                -              -               -         -                  146,863             -       146,863
                    ----------          -----       ----------     -----               ----------    ----------      -------

Balance at
September 30, 2003  74,114,183          7,411        2,272,728       228               3,819,854    (5,174,953)  $(1,347,460)
                    ==========          =====        =========       ===               ==========   ===========  ============
</TABLE>

          The accompanying notes are an integral part of the condensed
                       consolidated financial statements.



<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
            f.k.a. Pacific International Holding, Inc. and Subsidiary


                      CONDENSED CONSOLIDATED STATEMENTS OF
               CASH FLOWS For the nine months ended September 30,
                      2003 (Unaudited) and 2002 (Unaudited)

<TABLE>


                                                                                          2003              2002
                                                                                          ----              ----

  Cash flows from operating activities

<S>                                                                                    <C>                <C>
       Net loss                                                                        $(2,265,879)       $(1,485,369)
      Adjustments to reconcile net loss to net cash provided by (used

       in) operations:

        Depreciation, amortization, and other                                               293,392          244,512
        Common stock issued for consulting services                                          20,580                -
        Provision for inventory obsolescence                                                 10,000                -

      Net changes in operating assets and liabilities:

       Trade accounts receivable                                                             72,360            1,634
       Merchandise inventory                                                                 82,656        (196,039)

       Prepaid expenses and other current assets                                           (52,155)         (24,792)
       Accounts payable                                                                     837,906          170,893
       Accrued payroll and payroll taxes                                                      8,204           81,795
       Sales tax payable                                                                   (18,782)         (44,732)
       Gift certificates and customer deposits                                             (21,962)         (48,483)
       Accrued expenses                                                                      16,776          154,367
       Accrued property taxes                                                                   434
       Accrued interest                                                                      28,000         (37,900)
       Other assets and liabilities                                                               -           54,713
                                                                                     --------------           ------
               Net cash used in operations                                                (988,470)      (1,129,400)
                                                                                          ---------      -----------


  Cash flows from investing activities:

        Decrease in deposits                                                                  4,058         (28,579)
        Purchase of property and equipment                                                (113,659)          (8,807)
                                                                                          ---------          -------
               Net cash used in investing activities                                      (109,601)         (37,386)
                                                                                          ---------         --------


  Cash flow from financing activities:

        Proceeds from issuance of secured notes with warrants                               740,000                -
        Loans from and repayments to related parties                                              -           38,298
        Net borrowings on line of credit                                                                   (350,000)
        Proceeds from issuance of preferred stock with warrants                                            2,485,000
        Proceeds from issuance of common stock                                                               184,205
        Distribution to member                                                                             (200,000)
        Net borrowings on bank loan                                                               -        (826,198)
                                                                                     ------------ -        ---------
               Net cash provided by financing activities:                                   740,000        1,331,305
                                                                                            -------        ---------

  Decrease in cash and cash equivalents                                                   (358,071)          164,519
  Cash and cash equivalents, beginning of period                                            582,905          778,629
                                                                                            -------          -------
  Cash and cash equivalents, end of period                                                 $224,834         $943,148
                                                                                           ========         ========



  Supplemental disclosure of non-cash transactions:

  Conversion of member loans to equity                                                        $   -         $400,000
</TABLE>


          The accompanying notes are an integral part of the condensed
                       consolidated financial statements.




<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
            f.k.a. Pacific International Holding, Inc. and Subsidiary

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


a.   UNAUDITED  INTERIM  FINANCIAL   INFORMATION:   The  accompanying  unaudited
     condensed  consolidated  balance  sheets  of  Interactive  Motorsports  and
     Entertainment  Corp. (the "Company") at September 30, 2003 and December 31,
     2002, and the unaudited consolidated statements of operations for the three
     and nine months  ended  September  30,  2003 and 2002 and the  consolidated
     statements of cash flows and changes in  stockholder's  equity for the nine
     months  ended  September  30,  2003 and  2002,  have been  prepared  by the
     Company's  management and do not include all the  information  and notes to
     the  financial  statements  necessary  for a complete  presentation  of the
     financial  position,  results of  operations,  and cash flows in conformity
     with  generally  accepted   accounting   principles.   In  the  opinion  of
     management,  all  adjustments  necessary  for a  fair  presentation  of the
     results of  operations  and  financial  position have been included and all
     such  adjustments are of a normal  recurring  nature.  Although  management
     believes the disclosures are adequate to make the information presented not
     misleading,  it is suggested that these  condensed  consolidated  financial
     statements be read in conjunction with the audited financial statements and
     the  notes  thereto  included  in the  Company's  latest  annual  financial
     statements  included in the  Company's  annual  report on Form 10-KSB.  The
     results of  operations  for the three and nine months ended  September  30,
     2003 are not necessarily indicative of the results that may be expected for
     the full year ending December 31, 2003 or any future period.

b.   USE OF ESTIMATES:  The  preparation  of financial  statements in conformity
     with  accounting  principles  generally  accepted  in the United  States of
     America  requires  management to make estimates and assumptions that affect
     the  reported  amounts  of assets and  liabilities  and the  disclosure  of
     contingent  assets and liabilities at the date of the financial  statements
     and the  reported  amounts of revenues and  expenses  during the  reporting
     period. Actual results could differ from those estimates.

NOTE 2 - DEBT AND CREDIT ARRANGEMENTS

During the first quarter 2003,  the Company was  successful in obtaining  bridge
financing  totaling   $700,000.   On  March  7,  2003,  Perfect  Line,  Inc.,  a
wholly-owned subsidiary of the Company, issued Secured Bridge Notes and warrants
due  December  31, 2003 (the "Bridge  Notes") in the  aggregate  total amount of
$700,000 to one institutional investor and three related-party investors.

Additionally, the Company received a loan in the amount of $40,000 on July 9,
2003 under the terms of a promissory note from Tampa Bay Financial.

Under the terms of the Bridge Notes and the added promissory note,  Ropart Asset
Management  Fund, LLC  ("Ropart"),  Tampa Bay Financial,  Inc.  (related-party),
William R. Donaldson (related-party) and Erik R. Risman (related-party), are due
to receive the  principal  sums of  $500,000,  $140,000,  $50,000  and  $50,000,
respectively  on December 31, 2003.  Interest will be paid in cash on the unpaid
principal balance existing prior to maturity at an annual rate of twelve percent
(12%).  Interest  on the  unpaid  principal  under the  Bridge  Notes is due and
payable in arrears on the first day of each month,  commencing April 1, 2003. In
addition,  the Bridge Note holders are entitled to stock  payments in the amount
of one percent (1%) per month payable upon maturity of the Bridge Notes.

Ropart and Mr. Risman also received warrants entitling them to purchase from the
Company, at an exercise price of $0.17 per share,  2,941,176 and 294,118 shares,
respectively,  of the Company at any time before the earlier of June 30, 2004 or
six  months  following  payment  of the  Bridge  Note in  full.  Management  has
determined  the value of the  Ropart  and  Risman  warrants  to total  $146,863.
Accordingly,  the balance in notes payable on the accompanying condensed balance
sheet at September 30, 2003 is $593,137.

NOTE 3 - LICENSING AND CONSULTING AGREEMENTS

The Company has an exclusive licensing  agreement with the National  Association
for Stock Car Auto Racing,  Inc.  ("NASCAR") for  location-based  entertainment,
which  allows  the  Company  to use the  NASCAR  name and  logo.  The  Company's
confidential licensing agreement with NASCAR required annual royalty payments in
2002 and  requires  quarterly  royalty  payments in 2003  through  2009 based on
simulator,  merchandise,  food,  beverage,  sponsor, and remote site revenues at
varying percentages.  The licensing agreement has been extended through December
31,  2009 as of July 24,  2003 and the  exclusivity  has  broadened  to  include
"operator assisted" sites such as amusement parks, family entertainment centers,
casinos, auto malls, and other similar venues.

The Company also has licensing agreements with several NASCAR race teams,
drivers, and racetracks that expire on various dates through 2007.



<PAGE>


NOTE 4 - MANAGEMENT'S PLANS

For the year ended  December 31, 2002,  the first full year of operations  since
the Company's acquisition of the racing centers, the Company's 12 racing centers
generated revenue of approximately $9.6 million. Operating without the necessary
capital to properly market and merchandise these stores,  sales performance fell
short of expectations, resulting in a net loss of approximately $2.2 million for
the year ended  December  31,  2002.  Losses have  continued  in 2003 with a net
operating loss of $2,265,879 on sales of $5,757,009 for the first three quarters
of 2003.  If the  Company  is able to obtain  proper  funding,  which  cannot be
assured,  the Company plans to increase the revenue from the existing centers by
increasing the average transaction value,  returning to higher merchandise sales
levels, and improving the retention level of existing customers by enhancing the
gaming experience.  The Company anticipates accomplishing this through marketing
initiatives,  restoring the  merchandise  inventory  levels in each location and
through systems and technology  improvements.  In addition, the Company plans to
continue  to  deploy  its  simulator   assets  in  profitable   revenue  sharing
arrangements  and  mobile  unit  leases,  and to sell its  excess  inventory  of
simulators.

As previously  reported,  the equity financing of $2,610,050  received in August
2002 has been depleted.  The Company  received net proceeds of $687,500 from the
issuance of $700,000 of Secured  Bridge  Notes and  warrants in March 2003 which
has also  been  depleted.  The  Company  believes  the  projected  level of cash
receipts from simulator and merchandise sales will not be sufficient to fund the
daily operations of the business through 2003.  Management is seeking additional
sources of short-term funds to continue  operations  until additional  long-term
equity and/or debt financing can be established.  Management  believes that some
combination  of  simulator  purchases  (from  existing  inventory  of owned  and
unencumbered simulators),  equity financing and/or collateralized debt financing
will generate  enough capital to sustain the business,  although there can be no
assurances.

Since  inception,  the Company's  short-term  and long-term  plans have included
raising a level of  investment  adequate to  accomplish  the  objectives  of the
business.  The  required  level  of  financing  has not yet been  achieved.  The
Company's ability to raise the necessary  financing will depend on many factors,
including the economic and market conditions prevailing at the time financing is
sought.  Management  believes  that the  investment  climate  since the  Company
commenced  operations  has generally  been  unfavorable,  particularly  to newer
enterprises,  which has hindered the Company in obtaining its  financing  goals.
Although  the  Company  has  encountered  significant  difficulties,  management
continues to believe it can achieve the required  level of  financing;  however,
there can be no assurance  that  additional  financing  will be available or, if
available, that it will be on terms acceptable to the Company.

NOTE 5 - SUBSEQUENT EVENTS

Following  a  dispute  with  Pyramid  Management  Group,  the  landlord  for the
Company's racing centers in Albany,  NY and West Nyack, NY, the landlord filed a
petition for eviction with Perfect Line for both malls in September, 2003. After
further negotiation, a settlement was reached in November, 2003 that resulted in
Perfect  Line  buying out its lease at  Crossgates  Mall in  Albany,  NY and the
assets  have  been  removed  from  the  mall,  and the  parties  resolved  their
differences  with the Palisades  Mall in West Nyack,  NY resulting in an ongoing
lease for that mall space.

Effective November 1, 2003, Perfect Line assigned its lease at RiverTown Mall in
Grand Rapids, MI, to Checkered Flag Lightning, and 8 of the 10 racing simulators
will remain in that location on a revenue share basis. The transaction converted
a poor performing location into a revenue share location with guaranteed revenue
and no labor or occupancy expenses or liabilities.

The Company received  advance  deposits on simulator  purchases in the amount of
$252,000 in October.

On October 15,  2003,  Tampa Bay  Financial  loaned an  additional  $5,750 as an
extension of the promissory note.

The  Company  opened two new revenue  share  locations,  one at Cowboy  Pizza (4
simulators) in Monterey,  CA, on October 28, and another at NASCAR  SpeedPark (6
simulators) at St. Louis Mills mall on November 13.

The Company signed a revenue share agreement for 8 simulators in August with RBL
Development for  installation in the Burdick Driver Mall scheduled for the first
quarter of 2004.

The Company  signed a three year lease  agreement in October with  National Tour
for six simulators to be installed in a mobile experience that will be exhibited
at all NASCAR Nextel Cup events in 2004.

The Company signed a simulator  purchase agreement with Yello Properties Ltd. in
August  for 12  simulators  to be  installed  in a family  entertainment  center
planned to open in third quarter of 2004.

<PAGE>


PREFERRED STOCK CONVERSION

On August 2, 2003, the Company's  Preferred Stock issued and outstanding at that
date  converted  to Common  Stock based on the average of the average of the bid
and ask prices for the ten  trading  days prior to August 2, 2003 which  average
price was $0.147 per common share. Prior to the conversion,  the Company reached
an  agreement  with  two  of  the  major  holders  of the  Preferred  Stock  who
collectively held 96% of the outstanding  Preferred Shares. Mr. James M. Matheny
who held 2,272,728  shares of Preferred  Stock agreed to a conversion rate based
on $0.20 per Common Share which resulted in his Preferred Stock  converting into
11,363,640  shares of Common Stock. Ms. Vikki Cook agreed to defer conversion of
her  Preferred  Stock until January 1, 2004 at which time the  conversion  price
will be $1.00 per share unless the Company is unsuccessful in obtaining at least
$1,500,000  in debt  financing  by January 1, 2004 in which case the  conversion
rate will be $0.20 per share  consistent with Mr. Matheny.  The remainder of the
holders of preferred  stock holding a total of 200,000 shares of Preferred Stock
converted at $0.147 per share into 1,360,543 shares of common stock.  Therefore,
the conversion of the Preferred  Stock on August 2, 2003 has resulted in a total
of 12,724,184  additional shares of Common Stock outstanding as of the filing of
this Form 10-QSB.  Including 20,000 shares issued to Mr. Tony Stewart in October
and November 2003 for consulting  services,  the total common shares outstanding
as of the filing of this quarterly report on Form 10-QSB is 74,134,183 (update).


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

The following  discussion and analysis  provides  information that we believe is
relevant to an  assessment  and  understanding  of the  consolidated  results of
operations and financial  condition of the Company.  The terms "Company",  "we",
"our" or "us" are used in this  discussion to refer to  Interactive  Motorsports
and  Entertainment  Corp. along with Interactive  Motorsports and  Entertainment
Corp.'s wholly owned  subsidiary,  Perfect Line, Inc., on a consolidated  basis,
except  where the  context  clearly  indicates  otherwise.  The  discussion  and
information  that follows concerns the Registrant as it exists today, as of this
filing,  including the  predecessor of the Company's  operations,  Perfect Line,
LLC. This  discussion  and analysis does not relate to the operations of Pacific
International  Holding,  Inc. which had limited  operations  prior to the merger
with the Company on August 2, 2002.

Interactive  Motorsports and Entertainment  Corp. ("IMTS" or the "Company"),  an
Indiana  corporation,  through its wholly owned subsidiary,  Perfect Line, Inc.,
owns and operates NASCAR Silicon Motor Speedway  ("NSMS")  racing  centers,  the
largest chain of NASCAR branded  entertainment and retail stores. NSMS customers
experience  driving in a NASCAR race car that  simulates the motion,  sights and
sounds  of an  actual  NASCAR  event.  Located  in high  profile,  high  traffic
locations,  IMTS's 14 racing  centers  include up to 14 racecar  simulators  per
location and offer what the Company  believes is the best selling  NASCAR driver
merchandise available to the market.

In August of 2003 another wholly owned  subsidiary of IMTS was formed,  Race Car
Simulators,  Inc.("RCSI"),  for the purpose of administering the  manufacturing,
sales and marketing of revenue share locations for the race car  simulators.  No
revenues or expenses had been performed by RCSI through September 30, 2003.

For the year ended  December 31, 2002,  the first full year of operations  since
the  Company's  acquisitions  of the racing  centers,  the  Company's  12 racing
centers generated revenue of approximately  $9.6 million.  Operating without the
necessary  capital  to  properly  market and  merchandise  these  stores,  sales
performance fell short of expectation,  resulting in a net loss of approximately
$2.2 million for the year ended December 31, 2002.  Losses have continued in the
first three quarters of 2003 with a net operating loss of $2,265,879 on sales of
approximately  $5.8 million.  If the Company is able to obtain  proper  funding,
which  cannot be assured,  the Company  plans to increase  the revenue  from the
existing  centers by  increasing  the average  transaction  dollars,  increasing
merchandise  sales,  and improving the retention level of existing  customers by
enhancing  the gaming  experience.  The Company will do this  through  marketing
initiatives,  restoring  merchandise  inventory levels in each store and through
systems and technology improvements.

Perfect  Line's 14 current and 5 confirmed  future racing centers are located in
high traffic, high profile locations.
<TABLE>

             Location                      Market              Sq. Ft.          Simulators
       --------------------         ------------------      -----------         ----------
<C>                                                           <C>               <C>
1)       Mall of America            Minneapolis, MN           5,899             12 racecars
2)       Concord Mills              Charlotte, NC             7,875             14 racecars
3)       Mall of Georgia            Atlanta, GA               5,895             12 racecars
4)       Katy Mills                 Houston, TX               6,048             12 racecars
5)       RiverTown Crossing (2) (8) Grand Rapids, MI          6,101             10 racecars
6)       Crossgates Mall (3)        Albany, NY                4,167              8 racecars
7)       Riverchase Galleria        Birmingham, AL            6,188             10 racecars
8)       Universal CityWalk         Los Angeles, CA           5,067             12 racecars
9)       Opry Mills                 Nashville, TN             5,992             12 racecars
10)      Woodfield                  Chicago, IL               6,044             12 racecars
11)      Palisades Center           Nyack, NY                 5,700             12 racecars
12)      Arbor Place (1)            Douglasville, GA          5,055             10 racecars
13)      NASCAR SpeedPark (2)       Sevierville, TN                              6 racecars

</TABLE>

<PAGE>
<TABLE>

<C>                                <C>                                         <C>
14)      Pavilion Arcade (2)(3)     Myrtle Beach, SC                             5 racecars
15)      Cowboy Pizza (2)           Monterey, CA                                 4 racecars
16)      NASCAR SpeedPark(2)(4)     St. Louis, MO                                6 racecars
17)      Burdick Driver Mall(2)(5)  Syracuse, NY                                 8 racecars
18)      NASCAR Mobile Unit (6)     36 NASCAR Nextel Cup events                  6 racecars
19)      London Center (7)          London, England                             12 racecars

</TABLE>


(1)  Please note that the Arbor Place location was closed in July 2003.
(2)  Denotes a revenue share racing center.
(3)  Please note that the  Crossgates  Mall  location  was closed on November 4,
     2003.(See Subsequent Events above)
(4)  This revenue share location was opened November 13, 2003.
(5)  This auto mall revenue share is scheduled to open in first quarter of 2004.
(6)  Three year lease for six simulators.
(7)  This family  entertainment  center is scheduled to open in third quarter of
     2004.
     *   See Subsequent Events (above).


History

Perfect Line,  LLC, the  predecessor  of the Company's  wholly owned  subsidiary
Perfect Line, Inc.  ("Perfect  Line"),  was formed in 2001 as a Delaware limited
liability company and merged with and into Perfect Line, Inc. on August 1, 2002.
Perfect  Line  is in  the  business  of  owning  and  operating  simulated  race
facilities and selling racing related merchandise.

NSMS  racing   centers   were   originally   owned  and   developed  by  Silicon
Entertainment,  Inc.  ("SEI").  SEI opened its first site in August  1997 at the
Mall of  America  in  Bloomington,  Minnesota,  the  largest  mall in the United
States.  SEI raised large sums of initial  capital,  of which,  according to SEI
internal  documents,  approximately  $6.5  million  was  utilized  to create its
proprietary  software  technology and  approximately $25 million was utilized to
produce  approximately 170 simulators and complete the build-out of 15 stores in
high traffic malls.  SEI was unable to secure  additional long term financing to
support its capital  expansion,  and was liquidated through Chapter 7 bankruptcy
in April 2001.  Perfect Line's assets were primarily  acquired from creditors of
SEI. As a result of SEI's  bankruptcy,  Perfect  Line was able to  purchase  the
assets of SEI at a price substantially below SEI's cost.

Perfect  Line  re-opened  12 of the racing  centers,  which  utilize  136 of the
simulators,  between  July  2001 and  August  2002.  The  Company  at that  time
warehoused 32 simulators for future  deployment  and 2 simulators  were used for
research and development  purposes at the Company's  technology  center in Santa
Clara,  California.  The proprietary technology includes two U.S. Patents, which
combine  to  create  what  management  believes  to be one of the  world's  most
realistic simulation of the sights, sounds and motions experienced by driving in
an actual NASCAR race. The  proprietary  motion-based  platform that the racecar
simulator  is  mounted  on is among the other  assets  that  were  acquired  and
licensed as part of the transaction.

In August 2002,  Perfect Line became a wholly owned subsidiary of IMTS,  through
an  exchange  of shares  that  resulted  in  Perfect  Line  shareholders  owning
approximately 82% of IMTS equity.  Simultaneous  with this event,  approximately
$2.6 million in private  equity  financing  was made  available to Perfect Line.
Approximately one-half of the funding was used to retire the Company's bank note
and the balance was used for working capital.

The Company's Current Operations, Recent Developments and Plan for the Future

The  Company's  primary  focus is to leverage  the  Company's  ownership  of its
internationally unique,  proprietary race car simulation technology and creating
the  largest  chain of  officially-licensed,  NASCAR-branded  entertainment  and
retail  merchandising stores in the world. The Company believes that this can be
done  profitably  through a combination  of owned and operated  racing  centers,
third party revenue share locations  (family  entertainment  centers,  amusement
parks,  casinos,  auto malls,  etc.),  mobile unit leases and the  domestic  and
international sales of the race simulator product.

NASCAR racing is currently the #1 spectator sport in America. The Company has an
exclusive license agreement with NASCAR for location-based and operator-assisted
entertainment,  which  includes  the right to use the  NASCAR  name  within  the
Silicon Motor Speedway logo, on racing center signage,  within  collateral sales
materials,  on the NSMS web site, and within the NSMS racing simulator software.
The Company has also secured licenses with many popular racetracks in the United
States, and the cars driven by many of the race fans' favorite Winston Cup teams
and drivers,  ranging from established  stars such as Dale Earnhardt,  Jr., Tony
Stewart,  and Dale  Jarrett,  to rising  stars like Matt Kenseth and Kurt Busch.
These  licensing  agreements and the use of NASCAR related  identities and marks
provide immediate name recognition, credibility, and authenticity to NSMS.
<PAGE>

The  Company  has  integrated  these  license   agreements  with   sophisticated
proprietary  racing  simulator  technology  to create a chain of  NASCAR-themed,
family-oriented,  racing  entertainment  and  retail  merchandise  centers.  The
Company's  facilities are in some of America's  premier shopping malls,  tourist
destinations  and  amusement  attractions,  giving us access to over 160 million
annual site visits from potential customers.

Simulator  races take place on famous  NASCAR  Winston  Cup  racetracks  such as
Daytona International Speedway,  Indianapolis Motor Speedway, Lowe's (Charlotte)
Motor  Speedway,  Atlanta Motor Speedway,  Bristol Motor Speedway,  and Richmond
International Raceway.

NSMS's owned Racing Centers are operated as combined  racing  entertainment  and
retail  merchandise   stores.  In  addition  to  providing  customers  with  the
opportunity  to drive Winston Cup racecars,  NSMS Racing  Centers also feature a
selection  of  officially-licensed  NASCAR  merchandise.   Independent  research
indicates that NASCAR fans buy more  merchandise than fans from almost any other
sport and they are also the most brand-loyal. These characteristics helped boost
worldwide  NASCAR-branded retail sales from approximately $82 million in 1990 to
$1.5 billion in 2002. The Company's NSMS racing centers are the largest chain of
officially  licensed,  NASCAR-branded  interactive  entertainment  stores in the
world, and offer its customers the most popular NASCAR merchandise available.

Tony Stewart,  2002 NASCAR Winston Cup Champion,  has agreed to and continues to
be the spokesman and technical  advisor for NASCAR  Silicon Motor  Speedway.  He
will be featured in promotions,  advertising and point-of-sale material and will
also make appearances at NSMS racing center locations throughout the country.

The Company has entered into an agreement,  through its wholly owned subsidiary,
Perfect Line,  Inc.,  with Burroughs and Chapin  Company of Myrtle Beach,  South
Carolina  for  the  installation  of 16  proprietary  simulators  at the  NASCAR
SpeedPark  Smoky  Mountains,  the Myrtle Beach Pavilion  Amusement  Park's Ocean
Front Arcade and the NASCAR  SpeedPark at St. Louis Mills mall.  Together,  both
companies  are studying  further  opportunities  to install  these unique NASCAR
simulators in other  Burroughs and Chapin  properties.  In addition to the three
Burroughs and Chapin revenue share locations, the Company opened a revenue share
location at Cowboy Pizza,  a family  entertainment  center in Monterey,  CA. The
Company has signed revenue share  agreements with Burdick Driver's Mall, a large
auto  mall in  Syracuse,  NY.,  and with  Yello  Properties  for a 12  simulator
installation  within a  family  entertainment  center  in the  heart of  London,
England.  The Company has a signed lease  agreement with National Tour, Inc. for
the Company's  simulators to be featured in the Nextel  mobile  experience  that
will be taken to all 36 NASCAR Nextel Cup events for the next three years.

The Company has made technological improvements to the simulation,  resulting in
an enhanced racing experience. In addition, two popular racetracks,  Bristol and
Indianapolis,  were  introduced to the  simulation  experience  late in 2002 and
early in 2003. Other software  improvements were implemented,  including on-line
programs  such  as  MySpeedway.  MySpeedway  is  a  feature  on  IMTS's  website
(www.smsonline.com)  that allows  customers to find their recent lap times,  and
analyze their results to improve their  performance by comparing  their times to
those of other racers throughout the country.  Car parameters were introduced in
August 2003 allowing racers to set up their cars to their personal  preferences.
Adjustable parameters include traction control, anti-lock brakes, spoiler angle,
steering ratio, front anti-roll bar, engine,  transmission gearing, and rear end
ratio.

Technological  improvements  are  currently  under  development.  These  include
upgrading and enhancing the game graphics,  upgrading the  underlying  operating
system  in order  to  accommodate  future  developments,  and  what the  Company
believes will be  significant  revenue  enhancing  game features that target the
Company's core customers.

The Company is pursuing  additional  revenue  sharing  agreements  such as those
described  above and plans to expand this  activity,  assuming  the  appropriate
level of financing is obtained as discussed above.  Revenue share locations will
provide  IMTS the  opportunity  to install  simulators  in  existing  or planned
entertainment  venues  and share  proportionately  in the sales  generated  with
owner-operators. The Company will provide the simulators at cost (expected to be
financed  through  a  third  party  leasing  firm)  and  the  host  organization
(owner-operator) will provide the space, required site build-out, and day-to-day
operations  staffing.  The Company's initial revenue share  installation's began
with the NASCAR SpeedPark in mid-April 2003 in Sevierville,  Tennessee, followed
by the Pavilion at Myrtle Beach, South Carolina in early July 2003, Cowboy Pizza
in  Monterey,  CA in late October and the NASCAR  SpeedPark  in St.Louis,  MO in
mid-November.

The Company has established a subsidiary, Race Car Simulators, Inc., which, upon
the  receipt  of  future  funding  will  develop,   manufacture,  and  sell  its
motion-based  simulators  to  the  commercial   entertainment/amusement  market.
Exploiting this opportunity may create another attractive revenue stream for the
Company.  Race Car Simulators,  Inc. has hired an experienced sales manager, Mr.
Rich Wheeler,  and has a  representation  agreement  with veteran  international
amusement park executive Mr. Alain  Baldacci for several  international  markets
including Brazil, Japan, Australia, Argentina, Chile, and Korea.

Within its existing  racing  centers,  the Company  plans to improve each racing
center's  profitability  include increasing the average price per transaction by
encouraging customers to select multiple race packages, increasing the amount of
traffic in the stores through  advertising,  increasing  the NASCAR  merchandise
sales, and improving the retention level of existing  customers by enhancing the
gaming  experience  through  technology  initiatives  and the  addition  of game
parameters.
<PAGE>


Overview of Financial Position and Results of Operations

The Company has not generated a profit nor has it generated sufficient cash flow
since inception to fund operations.  Since inception on May 31, 2001 and through
September  30,  2003,  the Company has  accumulated  aggregate  losses  totaling
$(5,174,953).

The Company has funded its retained  losses  through the initial  investment  of
$650,000  in May  2001,  $400,000  of  capital  contributed  in  February  2002,
approximately  $2.6  million  received in August 2002 from the sale of Preferred
Stock,  and  $700,000  received  in March 2003 from the sale of  Secured  Bridge
Notes.  The Company also received  $40,000 a promissory  note. The Company is in
the process of  soliciting  additional  debt  and/or  equity  financing  to fund
current operating deficits and the Company's growth plan. See further discussion
under "Liquidity and Capital Resources" below.

During the three months ended September 30, 2003, the Company had total revenues
of $1,775,945  compared to $2,276,657  for the three months ended  September 30,
2002.  The  decrease in revenue of 22% is  attributed  to  deterioration  in the
economy and the related impact on discretionary  consumer  spending and the lack
of  capital  available  to  the  Company  for  marketing  and  the  purchase  of
merchandise.


Review of Consolidated Financial Position

Cash and Cash Equivalents: The Company had $224,834 in cash and cash equivalents
as of September 30, 2003 compared with $582,905 at December 31, 2002, a decrease
of $358,071.  This decrease in cash was caused  principally by the  year-to-date
net loss of  $2,265,879  offset by the increase in accounts  payable of $837,906
from December 31, 2002 to September 30, 2003. See further discussion of the cash
position of the Company in "Liquidity and Capital Resources" below.

Trade Accounts  Receivable:  These are primarily credit card receivables and the
lower  balance of $14,374 at September  30, 2003 versus  $86,734 at December 31,
2002 is due to the lower volume of business  transacted in September 2003 versus
the holiday  shopping  season in December 2002 when sales are at their  seasonal
peak.

Merchandise Inventory: At September 30, 2003, merchandise inventory decreased by
$82,656 from December 31, 2002 levels due primarily to insufficient capital with
which to purchase merchandise.

Accounts  Payable and Accrued  Expenses:  Trade accounts  payable have increased
$837,906  to  $1,187,116  at  September  30,  2003 from a balance of $349,210 at
December 31, 2002.  This  increase is due to the  non-payment  of rent and other
expenses  caused by the decline in sales in the first three quarters of 2003. In
addition,  certain items were moved from accrued expenses to accounts payable as
the exact amounts became known.

Notes Payable:  The Company  issued  secured bridge notes and warrants  totaling
$700,000  in  March  2003  as  further  discussed  in  Note 2 to  the  Condensed
Consolidated  Financial  Statements.  For accounting  purposes, a portion of the
total amount  received of $146,863 was  attributed to warrants and the remainder
of $553,137 was  attributed to the bridge notes,  although the total amounts due
under the bridge  notes and a separate  promissory  note of $40,000 is  $740,000
plus all  associated  interest.  The notes  bear  interest  at a rate of 12% per
annum. All amounts due under the notes are due and payable December 31, 2003.

Other  Liabilities:  Accrued  payroll and payroll  taxes,  sales taxes  payable,
unearned  revenue,  and other  accrued  expenses  fluctuate  with the  volume of
business, timing of payments, and the day of the week on which the period ends.

Review of Consolidated Results of Operations

Sales for the three months ended Septmeber 30, 2003 were $500,711 lower than the
comparable  period in 2002 due  primarily to continued  softening of the economy
and  the  associated  impact  on  consumer  spending  and to  minimal  marketing
expenditures  and  merchandise  inventories  by the  Company  due to the lack of
adequate  capital  resources.  During the third quarter of 2003, the Company has
experienced  a decline in the average  sales per week per store on a  comparable
basis for the third  quarter of 2002 to the third  quarter  of 2003.  Management
believes  this  decrease is primarily  attributable  to a lack of funding  which
resulted in decreased merchandise inventory and decreased marketing initiatives,
and to the difficult consumer and retail environment in 2003.

Operating   expenses  for  the  three  months  ended  September  30,  2003  were
approximately  126%  of net  sales,  compared  to  approximately  134%  for  the
comparable  period in 2002. The primary reasons for the decrease in 2003 are the
closing of the worst performing  centers,  and a decrease in corporate  overhead
expenses due to current  circumstances.  During this period,  the Company closed
one of its  poorest  performing  stores,  Arbor Place in  Douglasville,  GA, and
management was able to negotiate  with landlords  reduced rent in nearly all the
poor performing locations.
<PAGE>

Sales for the nine months ended  September 30, 2003 were  $1,228,109  lower than
the comparable period in 2002 again due primarily to continued  softening of the
economy and the associated  impact on consumer spending and to minimal marketing
expenditures by the Company and reduced merchandise  inventory levels due to the
lack of  adequate  capital  resources.  The Company  has  experienced  a similar
decline in the average  sales per week per store on a  comparable  basis for the
first nine months of 2002 to the first nine months of 2003.  Management believes
this decrease is primarily attributable to a lack of funding which resulted in a
lack of  promotion  and the ability to  purchase  merchandise  coupled  with the
difficult consumer and retail environment in 2003.

Operating   expenses  for  the  nine  months  ended   September  30,  2003  were
approximately  138%  of net  sales,  compared  to  approximately  120%  for  the
comparable  period in 2002. The primary reasons for the increase in 2003 are the
large decrease in sales which results in a higher percentage,  as many costs are
fixed, and an increase in corporate overhead expenses in the early part of 2003,
which were  established  following  the funding of the  business in August 2002.
Corporate overhead has been significantly cut in the last three quarters.

The  Company  has  negotiated  with its  landlords  to reduce  rents in its poor
performing  locations and has reduced certain corporate  overhead expenses in an
effort to reach monthly  profitability and improved cash flow. As of the date of
this filing,  two poor performing  mall locations have been closed,  and one has
been  assigned  to a  third  party  and is now a  revenue  share  location  (see
Subsequent Events).

In order to cut  overhead  expenses,  the  Company  has  consolidated  the Chief
Operating Officer and Chief Financial Officer with the Chief Executive  Officer.
The Chief  Technology  Officer  and some of his staff have gone on reduced  work
schedules,  and the  Company  has  eliminated  its group  sales  division  which
resulted in the  elimination of six positions.  Rent reductions have resulted in
savings of approximately  $85,000 per month. These reductions  combined with the
projected  increased  revenues from the recently signed revenue share and mobile
lease agreements of approximately  $67,000 per month and the increase in monthly
revenues from  increased  merchandise  sales of an average of $50,000 per month,
provide  management  with the  optimism  to reach  profitability  is in the near
future.

The Company has reached  definitive  agreements with several of its landlords to
defer past due rent amounts owed at June 30, 2003 and to begin paying rent based
on a percentage of gross sales for the month of July 2003  forward.  The Company
anticipates its rent expense will be reduced by approximately  $85,000 per month
over the next twelve  months.  In addition,  $311,000 of past due rent is due in
December,  2003,  and without  additional  financing or  immediate  revenue from
simulator  purchases,  the Company will need to either  renegotiate  the payment
terms with the landlords or face a default on the payments due and the resulting
consequences of being in default with the landlords.

Assuming the Company is successful at raising the next level of investment,  the
Company plans to develop the next generation  simulator and begin  production by
the first  quarter  of 2004.  The  Company is  exploring  selling  its  existing
inventory of excess simulators both domestically and internationally  which will
benefit the  Company's  revenue  and bottom  line.  Mobile  units and open wheel
simulators  (Indy or F-1 style) are also being  considered  in order to meet the
market demand for such products.

Liquidity and Capital Resources

The primary source of funds available to the Company are receipts from customers
for simulator and merchandise  sales,  proceeds from equity offerings  including
the $2,610,050  received in August 2002,  proceeds from debt offerings including
the  $700,000 in Secured  Bridge Notes and  warrants  issued in March 2003,  the
$40,000  Note  from  Tampa  Bay  Financial,  loans  from  shareholders,  sale of
simulators  from existing  inventory,  third party revenue share  agreements and
possible future financings.

As of the filing of this Form  10-QSB,  the net  proceeds of  $687,500  from the
Secured  Bridge  Notes and  warrants  financing  received in March 2003 has been
depleted and the Company  believes the  projected  level of cash  receipts  from
simulator  and  merchandise  sales  will not be  sufficient  to fund  the  daily
operations  of the  business  through  2003.  A  difficult  consumer  and retail
environment  and the lack of  merchandise  in the stores  have  created  further
challenges  at  increasing  the sales  volume  in 2003.  Management  is  seeking
additional  sources of short-term funds to continue  operations until additional
long-term equity and/or debt financing can be established.

Currently,  the  Company  is  exploring  both  equity  and  collateralized  debt
financing with several sources and is in various stages of discussion with each.
While the Company  believes  that at least one of these  financing  efforts will
occur,  there are no assurances.  Management  believes that some  combination of
simulator sales (from existing inventory of owned and unencumbered  simulators),
equity  financing  and/or  collateralized  debt financing  will generate  enough
capital to sustain the business until financing can be obtained,  although there
can be no assurances.

Since  inception,  the Company's  short-term  and long-term  plans have included
raising a level of  investment  adequate to  accomplish  the  objectives  of the
business.  The required  level of financing  has not yet been  achieved.  Absent
additional funding, the Company believes it may not have sufficient resources to
satisfy cash  requirements  for the next twelve  months or even the remainder of
2003. The Company's ability to raise the necessary financing will depend on many
factors,  including  the economic and market  conditions  prevailing at the time
financing is sought.  Management  believes that the investment climate since the
Company  commenced  operations has generally been  unfavorable,  particularly to
newer  enterprises,  which has hindered the Company in obtaining  its  financing
goals.  Nonetheless,  management  believes  that the recently  reduced labor and
occupancy  expenses,  combined with some  combination  of simulator  sales (from
existing inventory of owned and unencumbered simulators), the increased revenues
from the  recently  signed  third party  revenue  share  agreements,  and even a
minimum level of equity  financing  and/or  collateralized  debt  financing will
allow the Company to achieve improved cash flow and monthly profitability. While
management has pursued financing for some time, it has encountered  difficulties
in  raising  the  financing,  and  there  can be no  assurance  that  additional
financing  will be  available  or,  if  available,  that  it  will  be on  terms
acceptable to the Company.
<PAGE>

During the nine months ended September 30, 2003, the operating activities of the
Company used net cash of $988,470  compared to net cash used of  $1,129,400  for
the  comparable  period in 2002.  The  majority of the  increase in cash used in
operations  was  due to an  increase  in net  operating  loss  before  taxes  of
approximately $780,510 offset by the large increase in accounts payable.

During the nine months ended  September  30, 2003,  the Company used $109,601 of
net cash in  investing  activities  compared  with  $37,386  of net cash used in
investing activities during the comparable period in 2002. In 2003, the net cash
used relates primarily to the  capitalization of internally  developed  software
for the new Indianapolis  Motor Speedway racetrack and other enhancements to the
Company's proprietary racing simulation software.

The  Company  intends  to use the debt and equity  markets  to raise  sufficient
capital to fund its operating  deficits  while it refines its business model and
technology  and then markets the new offering to customers.  All of the $740,000
cash  provided  through  financing  activities  during  the  nine  months  ended
September 30, 2003  represents  the receipt of proceeds from the issuance of the
Secured Bridge Notes and warrants in March 2003, along with a promisorry note in
August 2003.

As of September  30, 2003,  the Company had cash and cash  equivalents  totaling
$224,834  compared to $582,905 at December  31,  2002.  Current  assets  totaled
$389,872 at  September  30, 2003  compared  to  $860,804 on December  31,  2002.
Current  liabilities  totaled  $2,730,246  on September  30, 2003  compared with
$1,286,533  on December 31, 2002. As such,  these  amounts  represent an overall

ITEM 3. Qualitative and Quantitative Disclosures about Market Risk

The fair value of the assets and liabilities  comprising the Company's condensed
consolidated  balance  sheet are not subject to an  inordinate  amount of market
risk.  The term  market  risk refers to the risk of loss  arising  from  adverse
changes in  interest  rates and other  relevant  market  rates and  prices.  The
Company's  primary  assets are the racing  simulators and the software that runs
them. As such, the Company does not believe it has any  significant  exposure to
market risk, as defined.

ITEM 4. Internal Controls and Procedures

(a)  Evaluation  of disclosure  controls and  procedures:  The term  "disclosure
     controls and procedures" is defined in the Securities Exchange Act of 1934.
     These rules refer to the  controls and other  procedures  of a company that
     are  designed to ensure that  information  required  to be  disclosed  by a
     company in the  reports  that it files  with the  Securities  and  Exchange
     Commission  (SEC) is recorded,  processed,  summarized and reported  within
     required time periods. The Company has controls and procedures in place for
     the gathering and reporting of business, financial and other information in
     SEC filings.  The Chief Executive  Officer and Chief Financial Officer have
     evaluated the  effectiveness  of the disclosure  controls and procedures at
     the Company  and its  subsidiaries  as of the end of the period  covered by
     this  Quarterly  Report.  Based on this  evaluation,  our  Chief  Executive
     Officer and Chief  Financial  Officer have  concluded as of the  evaluation
     date that such controls and procedures were operating effectively. Further,
     they have  concluded  that  there are no  significant  deficiencies  in the
     design or operation of internal  controls that could  significantly  affect
     our ability to record,  process,  summarize or report  financial  data.

(b)  Changes in internal controls: Subsequent to the evaluation date referred to
     above,  there have been no significant  changes in internal  controls or in
     other factors that could significantly affect those controls.

                                     PART II

Item 1.  Legal Proceedings

From  time to time,  the  Company  may be party to  various  legal  actions  and
complaints arising in the ordinary course of business.  Following a dispute with
Pyramid  Management  Group,  the landlord for the  Company's  racing  centers in
Albany,  NY and West Nyack,  NY, the landlord filed a petition for eviction with
Perfect Line for both malls in September,  2003.  After further  negotiation,  a
settlement  was reached in November,  2003 that  resulted in Perfect Line buying
out its lease at Crossgates Mall in Albany,  NY and the assets have been removed
from the mall,  and the parties  resolved their  differences  with the Palisades
Mall in West Nyack,  NY resulting in an ongoing lease for that mall space. As of
September 30, 2003 and as of the filing of this Quarterly Report on Form 10-QSB,
the Company is not aware of any other  material legal actions  directed  against
the Company.
<PAGE>


Item 2.  Changes in Securities

In April 2003,  30,000 shares of common stock were issued under a Form S-8 filed
on February 13, 2003 for consulting services.  No securities were issued for the
three months ended September 30, 2003.

Item 3.  Defaults Upon Senior Securities

None, not applicable.

Item 4.  Submission of Matters to a Vote of Security Holders

None, not applicable.

Item 5.  Other Information

None, not applicable.

Item 6.   Exhibits and Reports on Form 8-K

A. Exhibits.

31.1 Certification  of the principal  executive  officer,  William R. Donaldson,
     pursuant to 15 U.S.C.  Section  10A, as adopted  pursuant to Section 302 of
     the Sarbanes-Oxley Act of 2002.

31.2 Certification  of the principal  financial  officer,  William R. Donaldson,
     pursuant to 15 U.S.C.  Section  10A, as adopted  pursuant to Section 302 of
     the Sarbanes-Oxley Act of 2002.

32.1 Certification  of the principal  executive  officer,  William R. Donaldson,
     pursuant to 18 U.S.C.  Section 1350, as adopted  pursuant to Section 906 of
     the Sarbanes-Oxley Act of 2002

32.2 Certification  of the principal  financial  officer,  William R. Donaldson,
     pursuant to 18 U.S.C.  Section 1350, as adopted  pursuant to Section 906 of
     the Sarbanes-Oxley Act of 2002.

B. Reports on Form 8-K. (need the S-8 registrations)

     The Registrant  reported on June 6, 2003 on Form 8-K that Mr.  Frederick C.
     Treadway had resigned from the Company's Board of Directors,  effective May
     27, 2003.


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP.


Date: November 20, 2003       By: /s/ William R. Donaldson
                                 ---------------------------------------------
                                 William R. Donaldson
                                 Chairman of the Board and Chief
                                 Executive Officer


Pursuant to the requirements of the Securities Exchange of 1934, this report has
been signed below by the following  persons on behalf of the  Registrant  and in
the capacities and on the dates indicated.



Date: November 20, 2003       By: /s/ William R. Donaldson
                              ------------------------------------------
                              William R. Donaldson
                              Chairman of the Board and Chief Executive
                              Officer and Chief Financial Officer
                              (Principal Executive and Financial Officer)